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BY JEWEL GOPWANI
FREE PRESS BUSINESS WRITER

Pilots at Northwest Airlines Inc. accepted a contract Wednesday that cuts their wages for the next 5 1/2 years.

Northwest must now focus on its immediate challenges of finalizing deals with two more unions and securing federal legislation the airline says would save its pension plans.

The new pilots contract will save Northwest about $360 million a year through wage cuts and new work rules that reduce sick pay. The pact also allows Northwest to start its own commuter carrier.

But before the nation's fourth-largest carrier can see those savings it must solidify concessionary terms with two more unions.

Flight attendants on Sunday start a month of voting on their deal, which would cut pay 21%.

Northwest and its ramp workers union are due back in court May 15, where the airline will ask a bankruptcy judge to throw out the ramp workers contract so the company could impose its own terms. Ramp workers in March rejected their contract proposal.

For passengers, the pilots' decision has subsided the threat of a strike by Northwest's 5,000 pilots. A pilots strike could have forced Metro Airport's largest airline out of business. Northwest carries six of every 10 passengers who start their trips there.

The contract

The pilots contract passed with 63% of pilots voting for it.

Pilots "get to work under the worst contract that most pilots have ever seen in their careers," said Mark McClain, chairman of the Air Line Pilot Association's top council. "There's a sense of relief, but nobody's happy about it."

In a statement, Northwest CEO Doug Steenland said, "ALPA's contract ratification is a major step in ensuring the long-term success of our airline."

The deal continues a temporary 24% pay cut pilots took in November, with small raises starting in 2008.

That's on top of a 15% pay cut pilots voted to take in December 2004, intended to help Northwest avoid Chapter 11.

Northwest ended up filing for bankruptcy protection in September 2005, seeking to cut its labor costs by $1.4 billion.

In one of the most heated issues of the negotiations, the new contract allows Northwest to start a commuter carrier that can fly up to 90 jets with as many as 76 seats.

Furloughed Northwest pilots and flight attendants will have first shot at jobs at the new company, called Compass Airlines.

The outcome Wednesday disappointed young pilots who fly Northwest's fleet of DC9s. The company wants Compass' fleet to replace those planes, which average at 34 years old.

McClain said pilot retirements during the next few years should allow DC9 pilots to move up to larger aircraft and avoid being displaced by Compass.

In addition to pilots, Northwest's gate and ticket agents, along with three of its smaller unions have agreed to concessionary contracts.

Next up, pensions

Aside from labor agreements, pension legislation is one of the most pressing issues facing Northwest and its pilots union.

Northwest is $3.7 billion behind on its pension payments. Current laws require Northwest to pay most of that during the next few years. The airline and its unions are lobbying Congress for new regulations that would give the carrier 20 years to pay that debt.

Northwest has said repeatedly that such legislation would keep the airline from terminating its pension program and handing its obligations to the federal government.

US Airways, United Airlines and most recently Aloha Airlines terminated their pension plans while they reorganized in bankruptcy.

To avoid that, Northwest pilots in January agreed to freeze their traditional pension plan and convert to a less-lucrative, 401(k)-style plan to help the carrier avoid terminating its pension plan in the bankruptcy process.

"We're going to focus on passing pension legislation to make sure our employees who have sacrificed so much are protected," Andrea Fischer Newman, Northwest's senior vice president of government affairs, said Wednesday.

The U.S. Senate's version of a pension reform bill includes the airline provision. But the version in the House of Representatives does not.

"We've done all that we can do as Northwest pilots," McClain said.

Northwest CEO Steenland agrees.

In a letter Wednesday to the committee that will reconcile both versions of the bill, Steenland wrote: "By ratifying the new contract, our pilots have done what they needed to do as part of the restructuring process. We now need Congress to act."
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